Has the steel bubble burst?

It seems that the outlook on the steel Industry and prices changes almost day by day. What is clear is that there will not be a repeat of last years unprecedented increases, as demand clearly slows in Europe and North America. Already steel producers have taken measures to reduce production, presumably to ensure that over supply does not lead to price falls.

Corus who's share price fell by 4.7% yesterday, partly due to news that US Steel has taken one of it's blast furnaces out of production, were still talking of price increases yesterday. US Steel share prices fell to a six month low follwing its gloomy sales forecasts.

Corus had the following to say yesterday

We will look to recover significant raw materials costs through higher selling prices later in the year in the fourth quarter," a company spokeswoman told Dow Jones Newswires. The company expects prices to remain at the same level until then.
The costs of steel building blocks iron ore and coking coal have jumped over the last year, with steel makers recently agreeing to a rise of 71.5% on iron ore.
Europe's second biggest steel maker also said that conditions remained uncertain into the rest of the year, with underlying demand weakness exacerbated by stock overhang from the second half of 2004.
Demand weakness is particularly evident in long products used in the European construction industry, said a company spokeswoman, particularly in France and Germany.

Additionally European and North American production is being aligned to market demand, the company said.

This year Corus estimates only 1% growth in European steel demand, while North American demand is seen dropping by 3%. China again is seen as powering steel demand, with demand seen increasing by 13%.
"We will continue to review production and align it to market demand," a company spokeswoman said.
Corus cut production by 70,000 tons in March, April and May.

Thyssen Krupp were talking about price increases in the third quarter, whilst their rival rival Salzgitter AG's chief executive Wolfgang Leese said he does not
expect to raise per tonne prices again this year.

Yesterday also saw a slump in Thyssens share price of 3.1% and 2.2% for Acelor.

The European steel producers benefited during 2004 from strong demand in China, coupled with a healthy domestic orderbook, a situation that is unlikely to be repeated this year.